Topic: How To Invest

What is Pat’s commentary for the week of October 24, 2017

Article Excerpt

Dear Inner Circle member, The marketing of investment products is a highly developed and well-financed art. It tends to focus on an idealized description of the investment-product manager’s goals, rather than on how the manager will pursue them. It may gloss over the risks and instead aim to give you a warm, fuzzy feeling about what’s happening with your money. This feeling may spur you to put your money in unsuccessful investment products that fail to live up to your expectations, sometimes by a wide margin. Consider “hedge-fund investing”. The term “hedge” suggests a balanced or even risk-averse approach, as in “hedging against inflation”. But hedge-fund strategies include short-selling, derivatives trading, margin trading and other highly leveraged and/or highly speculative financial maneuvers. Hedge-fund managers use these maneuvers to offset the risks of investing in stocks or other volatile investments. This combination can work well for years, but the risk is merely hidden. At unpredictable moments, this risk flares up and the strategy backfires. Rather…

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